RPLU 2: Module 1: Fundamentals of Liability
Insurance Test with Questions and Answers
Verified 100% Correct Latest Update
Absolute Liability (Strict Liability) - ✔✔A type of liability that is imposed when a person or
entity is held accountable for a loss without regard to fault
Accident Year - ✔✔A twelve-month accounting period (usually a calendar year) in which
losses are allocated back to the accounting period in which the losses occurred, regardless of
when the losses were actually reported, booked, or paid
Actuarial Science - ✔✔A field of study that uses mathematical and statistical models and
tools to assess risk and develop rates
Actuary - ✔✔A professional statistician who has specialized academic training and who
calculates the risks and probabilities of future events, estimates claim costs based on past
experience, and uses projections to establish insurance rates
Admitted Market - ✔✔The insurance market that offers coverage from insurance companies
licensed by the state to conduct business. Subject to state regulation, unlike a non-admitted
market.
Agent - ✔✔An insurance professional who sells insurance on behalf of the insurance
company the agent represents. Typically authorized to bind coverage.
Alien Insurer - ✔✔An insurance company that is chartered by a foreign, non-U.S. company
and that must meet certain state requirements to conduct business within the state.
Assumed Liability - ✔✔A type of liability that arises from a contractual agreement as
opposed to liability that arises from common or statutory law.
, Bind - ✔✔The authority to make insurance temporarily effective until the insurer can issue
the policy
Breach - ✔✔A violation of a legal duty that is one of four criteria for proving negligence
Broker - ✔✔An insurance professional who solicits and negotiates insurance on the insured's
behalf and who typically is not authorized to bind coverage.
Calendar Year - ✔✔A calendar year accounting period in which losses are allocated back to
the accounting period in which the losses occurred, regardless of when the losses were actually
reported, booked, or paid.
Capacity - ✔✔The largest amount that an insurer is willing and able to underwrite, either on
an individual account or in the aggregate.
Captive Organization - ✔✔An organization that is formed as a subsidiary of a parent
organization to serve the parent organization's insurance needs and that is an alternative form
of risk retention
Carrier - ✔✔An insurance company
Case Law - ✔✔The body of court decisions (federal and state) that has shaped insurance law
and policies.
Case Reserve - ✔✔An amount that the claims professional estimates is needed to cover the
loss and corresponding loss adjustment expenses for a specific claim.
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